As the trend for working from home, either part or full time continues, the ‘short-cut’ method for claiming home office expenses as a result of the COVID enforced lockdown has been extended for another year – the 2022 financial year.
The ‘Shortcut’ method involves keeping a record of the actual hours worked from home and multiplying the total by $0.80 to get the expense to be claimed
The previously used fixed rate method works in much the same way: You claim $0.52 for each hour that you work from home. These covers running expenses of your home office area. You can also claim a percentage of your internet expenses and mobile phone expenses, if you need to use your personal phone for work related tasks.
But is the shortcut method better for you or the ATO?
The increased hourly rate of the shortcut method looks great on the surface but it might not be the best option for your circumstances. To find out which one is best for you, let’s look at a couple of examples:
Julie is a graphic designer who worked at home for 15 hours a week between the 1st of July 1 2021 and 30th of June, 2022. She recorded her phone and internet usage for one month and worked out that 50% of her mobile phone use is work related and internet is 60%. We will assume that she took 4 weeks annual leave too.
Fixed rate method:
15 hours per week x $0.52 x 48 weeks between 1st of July 2021 and 30th of June, 2022 = $374.40
Julie could claim 50% of her $99 monthly phone bill x 11 months = $544.50 and she could also claim 60% of her $80 monthly internet bill x 11 months = $528
The total work from home expenses Julie can claim for this period is = $1,446.90
With this method, Julie could claim 15 hours per week x $0.80 x 48 weeks = $576
But that’s it!
Phone and internet expenses are included in the $0.80 per hour rate of the shortcut method so she can’t add these on!
Choosing the fixed rate method for running expenses, at $0.80 an hour. Plus adding on her phone and internet costs separately, Julie could claim $870.90 more than if she used the shortcut method.
Simon is an advertising consultant who worked full time at home instead of the office, between 1st of July 2021 and 30th of June, 2022 and also took 4 weeks leave through the year. But unlike Julie, his company provide him with a company mobile phone. They don’t pay his internet costs though and he splits those with his house mate. Because he shares the internet, he can only claim 50% of his total internet use for working at home.
Fixed rate method:
Simon can claim 38 hours per week x $0.52 x 48 weeks = $948.48
His monthly Internet bill is $80 a month, split 50/50 with his housemate. Peter’s share of the bill is $40 and so he could claim 50% of that amount for 11 months = $220
Simon’s total work from home claim = $1,168.48
Simon can claim 38 hours per week x $0.80 x 48 weeks = $1,459.20
He can’t claim his internet with this method as it’s included in the $0.80 per hour rate.
His work from home deduction claim would be $290.72 higher by using the new Shortcut method.
So, you see, it really is worth looking at the figures before you decide which method to choose. It may be easier to just opt for the shortcut method to claim your work from home tax deductions but you may find yourself out of pocket by quite a lot of money.
It all depends on the records you have kept to allow this comparative analysis to be done.
Have a great day!